South Korea yesterday announced plans to spend an extra 4.9 trillion won (US$3.5 billion) this year to create 550,000 new jobs as it teeters on the edge of a recession brought on by the global slump.
The decision was reached at a special presidential council meeting on the economic crisis, the presidential office said. The money will come from a supplementary budget to be unveiled next week.
Media reports and officials say the government is likely to ask parliament to approve an extra budget of around 30 trillion won.
The country’s export-driven economy is on the brink of its first recession since 1998. The official unemployment rate rose to 3.9 percent last month, the highest in almost four years.
The number of people employed fell by 142,000 year-on-year, the largest reduction since September 2003.
South Korean President Lee Myung-bak called for all-out efforts to save or create jobs.
“The government’s goal this year is to create jobs because many people talk about social welfare, but the best welfare the government can provide is a job,” he told the meeting.
“The largest goal of the supplementary budget is first to create jobs and second to create jobs,” Yonhap news agency quoted him as saying.
These must first go to people who are the sole breadwinners in a family, he said, stressing that work gives people confidence and builds the base for economic recovery.
The country’s biggest business and union groups have already announced what Lee has called “historic, unprecedented measures” to save jobs — including wage cuts and job-sharing.
The spending announced yesterday amounts to roughly 2.9 trillion won for direct job creation, 500 billion won for encouraging job-sharing measures, 158 billion won for training and about 1.6 trillion won for measures to promote new employment and support the poor.
South Korean Finance Minister Yoon Jeung-hyun has said the economy will likely contract 2 percent this year and lose 200,000 jobs.
Daniel Melser, a senior economist with Moody’s Economy.com, called this figure optimistic and said the export-driven economy is likely to shed at least half a million jobs over the course of this year.
He said yesterday’s program was unlikely to reach its job creation target.
“Nevertheless, if the money is appropriately directed it will help to make somewhat of a dent in Korea’s lengthening unemployment queues — though a smaller dent than the half-million jobs which is hoped for,” Melser wrote in a commentary.
The collapse in foreign demand for South Korea’s exports had hit manufacturing very hard, with the finance and construction sectors also feeling the brunt of the crisis, he said.
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